FEW things say more about an administration's approach to policy than the composition of its team. And in seeking to appoint "Mr Pivot" - Kurt Campbell - to coordinate his approach to the Indo-Pacific, US President Joe Biden is signalling the intent of his administration to deliver a China strategy that is coherent, constructive and, above all, realistic.
Dr Campbell is widely regarded as the architect of the US' original "Pivot to Asia" under the Obama administration. After four years of uncertainty regarding its commitment to the region under Donald Trump, the US' traditional Asian allies like Japan and South Korea will no doubt be breathing loud sighs of relief.
Crucially, President Biden's commitment to the size, seniority and talent in his Asia-focused national security team suggests that for the first time in American history, it is Asia rather than Europe and/or the Middle East that will become, if not the US' dominant geopolitical theatre, then certainly the first among equals.
Thus, the two burning questions that Asian governments - and local investors - are keen to ask will be the type of policy initiatives that Dr Campbell might bring to Asia, and how might relations with China change under the Biden administration.
Fortuitously, Credit Suisse had the opportunity to engage in a one-on-one conversation with Dr Campbell in October 2020.
A careful review of his comments reveals the types of priorities and steps that he believes will be necessary for a coherent policy. The conclusions are fascinating - we present a precis of them below.
Competence
Dr Campbell believes the most important guiding principle that should shape America's approach to competition with China is less about military prowess than about recovering basic levels of administrative and policy competence and efficiency, possibly overlooked in the last four years.
Specifically, he identifies an urgent need to institute appropriate domestic policies toward education, income inequality, and investment in domestic infrastructure etc. In other words, Dr Campbell seems to believe the US cannot compete with China effectively unless it gets its own house in order, repairing domestic imbalances and correcting structural rigidities.
Engagement
The second principle would be to abandon isolationism and instead recommit towards diplomatic engagement with existing and potentially future allies - not only in Asia but globally - with the aim of holding strategic conversations with China from a position of consensus and ultimately strength.
Dr Campbell cautions that aiming for strategic engagement and exploring a common purpose with existing and new allies is "easy to say but harder to do", not least because the US currently lacks a cohesive strategy towards the region - a shortfall best reflected in its policy towards trade.
The challenge, however, is that a cross-party consensus now exists in the US towards aggressively confronting and tackling China's predatory trade practices, according to Campbell. Articulating a pan-Asian trade policy that minimises collateral damage among trading nations while still maintaining pressure and encouraging change in Beijing's approach - to reciprocity of access, level playing fields, respecting ownership of IP, and others - will not be easy.
One important step will be to re-engage with the various trans-Pacific trade initiatives, in our view. Under the outgoing administration, the US famously withdrew from multilateral initiatives covering, variously, defense, climate change and trade, etc. Additionally, traditional allies in Asia were either overlooked and/or the importance of their bilateral relations with the US downgraded. This will need to change.
Not surprisingly, a healthy degree of scepticism towards the US commitment to Asia now exists, which would clearly need to be addressed and resolved if subsequent diplomatic overtures are to be taken seriously, in our view. The appointment of the trade policy expert Katherine Tai as US Trade Representative - the former Chief Counsel for China Trade Enforcement under the Obama administration - suggests that Mr Biden is looking to pursue a more active trade policy than many were expecting.
As such, we believe there is a good chance that the US will revisit participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as part of a broader strategy towards Asia. Not to join the CPTPP would - by default - mean the China-sponsored Regional Comprehensive Economic Partnership (RCEP) would become the dominant trade organisation in Asia. At the very least, such an outcome would risk being seen as generating a "mixed signal."
Capacity building
The final plank in a joined-up US foreign policy towards Asia in general, and China in particular, is something Dr Campbell calls "capacity building". After so many decades focusing on Europe and the Middle East (including Iraq and Afghanistan), the number of personnel, and the level of specialist Asia knowledge among diplomats, security personnel, trade and economic advisors are sub-optimal relative to the importance of the Asia pivot.
A profound and meaningful investment in Asia-oriented human capital will henceforth be required, according to Dr Campbell.
A rather understated conclusion to Dr Campbell's self-described challenges above would be that he has his work cut out for him. Crafting a foreign policy towards China that differs in form to Mr Trump's combative style while still being broadly similar in substance will not be easy. Moreover, seeking to balance the US' China stance with the European Union's preference for greater commercial engagement with China also portends additional complexity.
Meanwhile, China will be looking increasingly inward as it seeks to prioritise the internal circulation aspect of its dual circulation strategy, in our view. This suggests China's economic (and technological) development will become increasingly politicised (and state-led) as Beijing's perception (and fear) of global containment grows.
Dr Campbell faces a daunting task. And his decades of experience in academia, in the military, and in government - including a four-year posting under the Obama administration as Assistant Secretary of State for East Asian and Pacific Affairs - will be critical and comprehensively tested.
- The writer is chief Investment Officer Asia Pacific, Credit Suisse
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